Project Report of Consumer Behavior2

8/9/2019 Project Report of Consumer Behavior2

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L B S I M T

A PROJECT OF CONSUMER BEHAVIOR

ONAttitude of Consumers towards Life

Insurance

SUBMITTED TOAsst. Prof. Zubair Ahmad

(Faculty of Consumer Behavior)

SUBMITTED BY

Amit Kumar Pandey, Akarsh Mishra, ChandrashekharVerma, Seetiz Vats, Yashesh Agarwal, Yogesh Pandey

LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENTAND TECHNOLOGY, BARILLY (U.P)


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Contents

Acknowledgement

Executive Summary

Preface

Objectives

Research Methodology

Interpretation & Analysis

Findings

Suggestions


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Annexure

Acknowledgement

We would like to thank our project guide and mentor Asst. Prof. Zubair

Ahmad (Lal Bahadur Shastri Institute of Management & Technology,

Bareilly) for his encouragement, sagacious guidance, critical appreciation

and above all moral inspiration in carrying out this project.

We express a profound sense of indebtness for his able guidance

and support since the very inception of the project.

Amit Kumar Pandey, Akarsh Mishra, Chandrashekhar Verma,

Seetiz Vats, Yashesh Agarwal, Yogesh Pandey


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Executive Summary

This study explores the attitude and perception of consumers towards life

insurance policies provided by various private sector/public sector insurance

companies in Bareilly city. We have tried to find out the type of insurance

plans which are best suited to the needs of the consumers.

We have also tried to find out the perception of Muslims towards insurance

i.e. according to them whether insurance is haram or halal. And tried to

identify the insurance plans which are best suited for Muslim people.

The study is based on primary data collected with the help of

questionnaires. We approached the potential respondents at various

residential and commercial areas of Bareilly City and collected their views.

The study reveals that there is a tremendous potential for insurance

companies in Bareilly city provided they develop the right product and

communication mix tailored according to the needs of consumers. Most of

the consumers want to have insurance as a by-product along with savings.

In case of Muslims, they are interested in Equity linked schemes with the

feature of guaranteed money back. Even though most of the Muslims


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consider insurance to be haram, but on the contrary they accept that

insurance and savings has become a basic need nowadays.

Preface

With the opening up of the insurance sector in December 1999, many new private

insurance companies have come up. This has increased the competition among

them and also posed a challenge to the existing nationalized insurer, which was

enjoying a monopoly status.

The study aims to understand various aspects of thinking which consumer has

regarding insurance. In todays liberalized and free insurance market, challenges

are thrown on the insurers to offer the customer insurance plans best suited to their

needs. The customer has a choice between so many insurers and their products. It

is also a challenging job for these insurers to find out the preference of the

customer. Therefore this study is of importance both from the point of view of the

customer, as it compares the salient features of the products offered by these

insurers, and from the point of view of the insurance companies as it tries to find

out the market preference.

HISTORY OF INSURANCE


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The insurance sector in India dates back to 1818, when Oriental Life

Insurance Company was incorporated at Calcutta. Thereafter, few other

companies like Bombay Life Assurance Company, in 1823 and Tritron

Insurance Company, for General Insurance, in 1850 were incorporated.

Insurance Act was passed in 1928 but it was subsequently reviewed and

comprehensive legislation was enacted in 1938. The nationalisation of life

insurance business took place in 1956 when 245 Indian and Foreign

Insurance provident societies were first merged and then nationalised. It

paved the way towards the establishment of Life Insurance Corporation

(LIC) and since then it enjoyed a monopoly over the life insurance business

in India. General Insurance followed suit and in 1968, the insurance act was

amended to allow for social control over the general insurance business.

Subsequently in 1973, non-life insurance business was nationalised and the

General Insurance Business (Nationalisation) Act, 1972 was promulgated.

The General Insurance Corporation (GIC) in its present form was

incorporated in 1972 and maintained a very strong hold over the non-life

insurance business in India. Due to concerns of

(a) Relatively low spread of insurance in the country.

(b) The efficient and quality functioning of the Public Sector insurance

companies

(c) The untapped potential for mobilizing long-term contractual savingsfunds for infrastructure

The (Congress) government set up an

Insurance Reforms committee in April 1993. The Committee submitted its

report in January 1994, recommended a phased program of liberalization,


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and called for private sector entry and restructuring of the LIC and GIC. The

United Front government moved an insurance bill but it did not pass. The

BJP government moved an insurance bill again in 1998, which had also to

be referred back to a select committee of parliament. But now the parliament

has given a nod to the Insurance Regulatory and Development Authority

(IRDA) bill with some changes in the original structure.

LIBERALISATION

The decision to allow private companies to sell insurance products in India

rests with Indian Parliament. Opening up the insurance sector requiredcrossing at least two legislative hurdles. These were the passage of the

insurance Regulatory authority (IRA) bill, which would make IRA a

statutory regulatory body and the amendment of the LIC and GIC Acts,

which would end their respective monopolies.

Subsequently in pursuance to the announcement made by the Union Finance

Minister in his budget speech of 1998-99, The Insurance Regulatory and

Development Regulatory Bill, 1999, was passed by both houses of

Parliament. The Bill was assented to by the president and notified on

December 29,1999.With the Insurance Regulatory and Development

Authority Act, 1999 coming into force the insurance industry has been

opened up for the private sector.

The Act provides for the establishment of a statutory IRDA to protect the

interest of insurance policyholders and to regulate, promote and ensure

orderly growth of insurance industry. The IRDA was formed by an act of the

Parliament on April 19, 2000.The IRDA Act also seeks to amend the Life


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Insurance Act, 1956, the General Insurance Business (Nationalisation) Act,

1972, and the consequential provisions of the Insurance Act,1938 with a

view to seizing the exclusive privilege of LIC and GIC in the life and non-

life businesses respectively.

Under the IRDA Act, an Indian insurance company will be allowed

to conduct insurance business provided it satisfies the following conditions:

It must be formed and registered under the Companies Act, 1956; the

aggregate holdings of equity shares by a foreign company, either by itself or

through its subsidiary companies, should not exceed 26% paid up equityshare capital of an insurance company.

Its sole purpose must be to carry on life insurance business or general

insurance business or reinsurance business.

It has also been provided in the IRDA Act that on or after the

commencement of the act no insurer will be allowed to carry on life

insurance and general insurance business in India unless it has a paid up

equity capital of rupees 1 billion. For carrying on the reinsurance business,

the minimum paid up equity capital has been prescribed as Rs.2 billion. The

Reserve Bank of India (RBI) has also issued guidelines for banks entry into

the insurance business.

Following the passage of the IRDA Act, by March 2001, thirteen new

life insurers have received licence from IRDA. Although Private insurance

companies have commenced operations, the nationalised insurance

companies are expected to dominate the market in the near future.


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The limiting factor for prospective private insurers will be the extensive and

costly distribution structure required. The new entrants cannot expect to

duplicate the extensive distribution network of the nationalised insurance

companies. Building a distribution network is expensive and time

consuming.

Potential in the insurance sector

Scope of insurance business in India

The Malhotra Committee estimated that the insurance penetration in

India is to the extent of about 25% of the insurable population. As of 1999-

2000, LICs Insurance Premium Income was approximately Rs.32,000 crore.It is observed that currently LIC has about 10 crore policies in force, which

contribute a Premium of about 6% of the GDS (Gross Domestic Savings) of

households in India.

Based on a report by the Confederation of Indian Industries (CII), it is

anticipated that this figure of 10 crore policies in force is likely to double in

the next decade. By the year 2010, the premium income is expected to

account for 18% of the GDS, amounting to Rs. 512,000 crore.


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0

50

100

150

200

Policies in

Force(Mn.)

Year

Number of Policies in Force

1999

2001

2002

2004

2006

2008

2010

0

5

10

15

20

% GDS

1999 2002 2006 2010Year

Life Premium as a proportion of

Gross Domestic Savings

%GDS

The Decision Process


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In general, the Indian community is very cautious when making business

decisions. Consequently, Indian consumers will scrutinize vigorously

products and services offered by insurance companies. In addition, Indian

consumers prefer a wide-range of options. Below, currently available

options for various types of insurance are presented. Given uncertainty about

lifes duration and about increasing costs and responsibilities, consumers

may opt for a life insurance policy with the following features:

* Policies that meet an untimely accident or a premature death whereby

dependents are able to continue meeting financial obligations for some

initial period. This is very important because, in many Indian families, there

is only one earner in the household.

* Policies that meet an untimely accident involving the loss of a limb,

creating a major disability.

* Policies that avail owners of a tax rebate a fixed rate of return on the

insurance investment, and a nontaxable payout upon maturity.

* Policies that provide a bonus if insured has not withdrawn any sum of

money during the insured period, (certain sums can be withdrawn after the

policy has been in effect for specified periods of time).

* Policies that provide for a housing loan at very favorable interest rates

after the insurance policy has been in effect for a specified duration.

* Policies that provide a money-back policy after reduced durations: 5 or

10 years. Funds from this payout may be expended or reinvested in other

saving programs or in other life insurance plans.

Global Life Insurance Premiums


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Regions/Country USD (billions) Percentage

North America 689.2 32.7

Latin America 653.0 31.0

Europe 32.9 1.6

Asia 647.1 30.7

India 3.0 0.15

World 2,105.8 100.0

Insurance Penetration

Compared to developed and industrialized countries, India is at the lower

end of the spectrum when it comes to penetration of the market. Among

countries in the lower per capita income band of less than USD 2,000 per

annum, India is second only to Zimbabwe.

Density

Switzerland is the world's largest per capita insurance spender (USD 4,663

per inhabitant), ahead of Japan (USD 4,132 per inhabitant), and far ahead

(200 percent more) of North America, and even further ahead (250 percent

more) of Western Europe.

India is ranked near the bottom of the list of countries on insurance spending

with USD 6 per inhabitant.

Resistance To Insurance


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The concept of insurance being intangible and abstract and somewhat

conflicting with our ingrained patterns of traditional, cultural, benefits, the

need is not readily felt and understood, felt and accepted.

The sacrifice involved in payment of premiums is immediate and real

whereas the benefits are perceived as contingent and distant, leading to a

tendency to procrastinate and delay decision-making.

People resist in taking a life insurance policy, as the commitment is

long term. They prefer investing their money in other avenues like mutual

fund, bonds, shares etc., where they expect higher returns. People do not

readily accept the fact that they are prone to the risk of death.

It is important for the people to understand the importance of life

insurance. Risk coverage is the essential feature of an insurance policy, the

investment aspect is secondary. Nowadays insurance companies are offering

policies designed purely for investment purpose, which also have an

insurance element in them. Such policies are attracting people for their

investment needs, though the element of risk coverage is not sufficient.

It is said that the life of every person must be insured up to the human life

value (HLV) of that person. Human life value means the value of his

potential net earnings estimated for the period for which he is going to earn

less the amount of money he spends on his self-maintenance. Therefore it

becomes important for every earning individual to insure himself up to the

amount of his HLV. But not many people understand the relevance of

insurance; therefore they resist buying a life insurance policy.


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Objective of the Research

The objective of the study was to gain maximum information about

customers preference towards the life insurance products offered by various

insurers and gain an insight into the prevailing market conditions. For this

purpose, we personally interviewed the existing as well as prospective

customers.

The market survey attempted to acquire maximum information about

the life insurance status of the people in Bareilly. An attempt was made to

cover a mix of people from various income groups and occupations. Onlyinsurable individuals were interviewed, i.e. earning individuals in the age

group of 20-55 years. A fair mix of both male & female occupation was

included.

The research attempted to find out the preference of the people

towards a particular type of insurance policy. It was also attempted to find

out the preference of people towards a particular insurer.

As we know that insurance penetration is very low among the muslim

people, we separately surveyed Muslim people & tried to find out their

perception towards insurance i.e. they considered it to be haram or halal.

Also we wanted to find out the type of insurance products which will be

readily accepted by Muslims or shariyat compliant insurance plans.


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Methodology used in study

Methodology is of vital importance in any project report. Here the study

aims finding consumer preference for insurance products in Bareilly.

For gathering information about the life insurance policies offered by the

insurers we used the methods of interviews & discussion. The market survey

of the individual was done with the help of a questionnaire. We met

individuals at their offices/shops and interviewed them extensively- about

their market preference.

Type of Research : Descriptive

Sampling Style: Judgmental Sampling

Population: All people in Bareilly in the age group 20-55 yrs

whose monthly family income => Rs 5000

Sample Size: 148 (110- non Muslims, 38 Muslims)

Data Collection: Personal interview through a structured

questionnaire


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INTERPRETATION AND ANALYSIS (Non Muslims)

Q1. Do you have a life insurance policy?

Yes ( ) No ( )

yes

76%

no

24%

yes

no

This shows that insurance penetration is fairly high among the non-muslim

people surveyed by us .


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If yes, please name the policy and company


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64%

4%

10%

4%

2%

16%

LIC

TATA AIG

ICICI

ING VYSYA

HDFC STANDARD

RELIANCE

The above figure shows that LIC has the largest market share. Among the

private sector companies, Reliance Money has the largest share followed by

ICICI Prudential Life Insurance.


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If no, do you want to have an insurance plan in future?

YES

92%

NO

8%

YES

NO

This indicates that there is a tremendous potential in the insurance sector as

almost all prospects want to get insured.


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Q2 (a). Are you satisfied with terms and conditions of the policy and its

benefits ? Please give reasons for your answer.

SATISFACTION WITH POLICY

YES

86%

NO

14%

YES

NO

This indicates that majority of the people were satisfied with the benefits

provided by their policy. Rest of them felt that the policy features and

benefits were not aligned with their actual needs.


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(b) Are you satisfied with after sales services and support provided by the

insurance company? Please give reasons for your answer.

SATISFACTION WITH COMPANY/AGENT

YES

69%

NO

31%YES

NO

This shows that quite a few people are not satisfied with the insurance

agents as they betray them after selling the policy to them.

Q3. From which type of insurance company will you like to get insured ?


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SECTORAL PREFRENCES

GOVERNMENT

60%PRIVATE

11%

BOTH

29%

GOVERNMENTPRIVATE

BOTH

This shows that majority of the people prefer government companies for

insurance as they feel that their money is secure in the government coffers.

Q.3) What benefits do you seek from the insurance plan? Please rank them

as per your preferences.( Rank 1 means most preferred )

0

10

20

30

40

50

60

70

80

RAN

RAN

RAN

RAN

RAN

RISK COVERAGE

SAVINGS

TAXBENEFITS

INVESTMENT

PENSION BENEFITS


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The above graph shows that Risk coverage is the most prominent reason for

getting insured, followed by Investment, Savings, Tax Benefits and Pension

Benefits respectively.

Q5. Which types of insurance plans are preferred by you? Please rank them

as per your preferences. ( Rank 1 means most preferred ) ?


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0

10

20

30

40

50

60

70

80

RANK

1

RANK

2

RANK

3

RANK

4

RANK

5

M ONEY BA C

TERM P LAN

ULIP

P ENSION P LA

GROUP P LAN

The graph reveals that Money Back policies have been ranked first, Unit

Linked Insurance Plans second, Term Plans third, Pension Plans fourth and

Group Plan Fifth by the respondents.

Q6. To whom would you like to get insured?


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SELF

58%

SPOUS

22%

SON

13%

DAUGHTE

7%

SELF

SP OUSE

SON

DAUGHTER

The figure shows that majority of the people either wanted insurance for

themselves or their spouses.

Q7. How many years do you wish to pay premium for the policy?


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20 YEARS

7%

20 YEARS

The above figure shows that most of the people are interested in short term

insurance plans.

Q8. How would you like to pay the premium? Please rank them as per your

preferences.( Rank 1 means most preferred ) ?

0

10

20

30

40

50

60

70

RANK1 RANK2 RANK3 RANK4

MONTHLY

QUARTERLY

HALF YEARLY

YEARLY

Most of the people prefer making quarterly payments followed by yearly,

half yearly & monthly payments respectively.

Q9. According to you what should be the premium for insurance plan ?


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20K

2%

20K

Most of the respondents want to pay Rs 5000- 10000 as the premium.

Number of members in family____

Most of the respondents have small families having 4-7 members only.

Monthly Family Income

Numbe r of family mem be

Two

Three

Four

Five

Six

Seven

Eight

>Eight


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Monthly family income of majority of the respondents lies in the range of

Rs. 15000-Rs. 25000.

Income range

5k-15k

15%

15k-25k

48%

25k-35k

29%

35k-45k

4%

45k-55k

4%

5k-15k

15k-25k

25k-35k

35k-45k

45k-55k


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Marital Status

married

49%unmarried

51%

married

unmarried

The figure shows that the sample taken is a judicious mix of both married

and unmarried people.


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INTERPRETATION AND ANALYSIS ( Muslims)

Q1. Do you have a life insurance policy?

Insurance

Penetration

68%

32%

Yes

No

The figure shows that insurance penetration among Muslim people is much

less as compared to Non Muslims.


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Q2 (a). Are you satisfied with terms and conditions of the policy and its

benefits ? Please give reasons for your answer.

All the people were complacent with the benefits conferred by their policies.

Satisfaction with policy

Yes100%

No0%


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Are you satisfied with after sales services and support provided by the

insurance company? Please give reasons for your answer.

Majority of the people were satisfied with the insurance agents. Quite a few

people were dissatisfied because of poor after sales service and support

provided by the agents.

From which type of insurance company will you like to get insured?

Satisfaction with co./agent

Yes92%

No8%


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Future Prospe

G overnme

69%

P rivat

26%

Bot

5%

Majority of the Muslims prefer public sector insurance companies because

they perceive them as safe havens for their investments.

Q4. What benefits do you seek from the insurance plan ? Please rank

them as per your preferences.( Rank 1 means most preferred ) ?

0

5

10

15

20

25

30

Rank 1 Rank2 Rank 3 Rank 4 Rank 5

Risk Coverage

Savings

Tax Benefits

Investment

Pension Benefits

Risk coverage is the most preferred followed by savings, investments, tax

benefits and pension benefits respectively.


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Q5. Which types of insurance plans are preferred by you ? Please rank them

as per your preferences .( Rank 1 means most preferred ) ?

0

5

10

15

20

25

30

Rank1 Rank2 Rank3 Rank4 Rank5

Money Back

Term Plan

ULIP

Pension Plan

Group Plan

Money back plans have got the first rank, Unit Linked Insurance Plans

second rank, term plan third rank, pension plan fourth rank and the groupplan have got the fifth rank.


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Q6. To whom would you like to get insured ?

Member to be insure

Self

31%

Spouse

19%

Son

23%

Daughte

27%

Muslim people want to get themselves and their children insured so that they

have a safe and secure future.


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Q7. How many years do you wish to pay premium for the policy?

Muslim people also prefer short term insurance plans.


preferences.( Rank 1 means most preferred ) ?

0

5

10

15

20

Rank 1 Rank 2 Rank 3 Rank 4

Monthly

Quarterly

Half Yearly

Yearly

Policy Duration

5 Years

32%

10 Years

41%

15 Years16%

20 Years

11%


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Muslim people prefer to make monthly payments followed by quarterly, half

yearly and yearly.

Q9. According to you what should be the premium for insurance plan?

According to most of Muslim people insurance premium should be in therange of Rs. 5000 Rs. 15000.

Q10. Do you have any idea that insurance is HARAM or HALAL ?


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Haram

57%

Halal32%

Don't Know

11%

Majority of people perceive insurance as haram, the reason being insurance

is having a component of interest coupled with it. On the contrary, manypeople perceive it as halal, the reason being insurance is allowed for needy

people.

Q11. If provided with interest less/ shariyat compliant policies, will you

like to avail the policy?

People were equally divided on this question. Almost half of them wanted to

avail the new policies as they were shariyat compliant.



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No. of family memb

4 member

36%

5 member

6 member

11%

7 member

11%

8 member

11%

Muslim people have somewhat large families and therefore group plans are

needed to serve them.

Income Level

5k-15k

26%

15k-25k

21%

25k-35k

37%

35k-45k

16%


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Marital Status

Married

37%

Unmarried

63%

This shows that most of the respondents were unmarried and were likely to

avail insurance plans in the near future.

Findings:


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1. People lack trust on private companies.

2. Agents generally focus on affluent customers.

3. Once policy is sold, agents are not bothered about problems of

customers thus mainly customers get dissatisfied due to agents.

4. Risk covers and savings policy are required with more promising

features.

5. Bottom of pyramid people are not targeted by majority of the

companies.

6. There is a tremendous potential to offer customized plans to Muslim

people as insurance penetration is very low and people have religious

apprehensions towards insurance which can be overcome by the

customized plans.


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\

Suggestions:

1. Private companies should emphasize on building trust in comparison to

government companies.

2. Celebrity endorsement by persons having very good social image.

Muslim Opinion Leaders should be chosen to endorse the plans for Muslims.

3. Focus on bottom of the pyramid people. Ignore 80:20 rules. Focus on

80% masses and offer low prices.

4. More flexibility should be offered to poor people in terms of payment of

premiums.

5. Special Equity linked schemes with guaranteed money back should be

launched for Muslim People.

6. Group plans should be articulated in a way as to cover large families.

7. Products providing savings with insurance as a by-product should be

launched.


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Limitations

The study has been limited by geographical constraints, as

companies operating in Bareilly are only covered. The market

survey also restricts to the individuals in Bareilly only.

Dual constraints of time and money.

Small sample size taken.


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(b) Are you satisfied with after sales services and support provided by the

insurance company ? Please give reasons for your answer.

Yes ( ) No ( )

_____________________________________________________________

___________

Q3. From which type of insurance company will you like to get insured ?

Government ( ) Private ( )

Q4. What benefits do you seek from the insurance plan ? Please rank them


Risk coverage ( ) Tax benefits ( ) Investments ( )

Savings ( ) Pension benefits ( )

Q5. Which types of insurance plans are preferred by you ? Please rank them



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Money back ( ) Unit Linked Insurance Plan ( ) Term plan ( )

Pension Plan ( ) Group plan( )

Q6. To whom would you like to get insured ?

Self( ) Spouse( ) Son( ) Daughter( ).

Q7. How many years do you wish to pay premium for the policy ?

Less than 5 years ( ) Ten years ( ) Fifteen years ( ) Twenty years (

)

More than twenty years ( ).


preferences .

( Rank 1 means most preferred ) ?

Monthly ( ) Quarterly ( ) Half yearly ( ) Yearly ( ).

Q9. According to you what should be the premium for insurance plan ?

Q10. Do you have any idea that insurance is HARAM or HALAL ?


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Haram ( ) Halal ( ) Dont know ( ).

Q11. If provided with interest less/ shariyat compliant policies, will you

like to avail the policy?

Yes ( ) No ( ) Cant say ( ).

Name ____________________________________________

Age______ Gender_______ Marital Status______________


Monthly Family Income

Rs 5000 15000 ( ) Rs 15000 25000 ( ) Rs 25000 35000 ( )

Rs 35000 45000 ( ) Rs 45000 55000 ( ) Rs 55000 and above ( ).

Educational Status

________________________________________________________


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Occupation

_____________________________________________________________

_

Address

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_________________________________

Contact Number ___________________________

Documents

Project Report of Consumer Behavior2